Correlation Between MTI WIRELESS and CEOTRONICS

Can any of the company-specific risk be diversified away by investing in both MTI WIRELESS and CEOTRONICS at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining MTI WIRELESS and CEOTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MTI WIRELESS EDGE and CEOTRONICS, you can compare the effects of market volatilities on MTI WIRELESS and CEOTRONICS and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in MTI WIRELESS with a short position of CEOTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTI WIRELESS and CEOTRONICS.

Diversification Opportunities for MTI WIRELESS and CEOTRONICS

0.71

Correlation Coefficient

MTI WIRELESS  CEOTRONICS

Poor diversification

The 3 months correlation between MTI and CEOTRONICS is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding MTI WIRELESS EDGE and CEOTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEOTRONICS and MTI WIRELESS is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MTI WIRELESS EDGE are associated (or correlated) with CEOTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEOTRONICS has no effect on the direction of MTI WIRELESS i.e., MTI WIRELESS and CEOTRONICS go up and down completely randomly.

Pair Corralation between MTI WIRELESS and CEOTRONICS

Assuming the 90 days horizon MTI WIRELESS is expected to generate 1.03 times less return on investment than CEOTRONICS. In addition to that, MTI WIRELESS is 1.63 times more volatile than CEOTRONICS. It trades about 0.1 of its total potential returns per unit of risk. CEOTRONICS is currently generating about 0.17 per unit of volatility. If you would invest  570.00  in CEOTRONICS on December 30, 2024 and sell it today you would earn a total of  300.00  from holding CEOTRONICS or generate 52.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

MTI WIRELESS EDGE  vs.  CEOTRONICS

MTI WIRELESS EDGE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MTI WIRELESS EDGE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MTI WIRELESS reported solid returns over the last few months and may actually be approaching a breakup point.

CEOTRONICS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CEOTRONICS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CEOTRONICS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MTI WIRELESS and CEOTRONICS

The main advantage of trading using opposite MTI WIRELESS and CEOTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTI WIRELESS position performs unexpectedly, CEOTRONICS can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CEOTRONICS will offset losses from the drop in CEOTRONICS's long position.

The idea behind MTI WIRELESS EDGE and CEOTRONICS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.